The mortgage rates on mortgage loans increased again – this time it was Bank. Why do prices rise and why are mortgage rates so opaque?
Over the past five years, mortgage companies have slowly but surely made it considerably more expensive to be mortgage loan. The Danish mortgage loan system still delivers some of the world’s cheapest mortgage loans, but in many cases it has been twice as expensive to trade mortgage loans. It was probably not the case if it was milk or potatoes.
Reasons for higher mortgage rates
Mortgage companies have two excuses to explain the sharp price increases. The first is that the companies must put more money aside for reserves. The other is that the short F1 and F2 mortgages must be phased out and that the price increases must entice customers to choose other loans.
Both explanations are reasonable enough in the short term. But the excuses have an expiration date. There must be limits on how much money should be set aside for increased reserves, and once that is done, prices can and should be reduced again.
In turn, it sounds hollow when the mortgage sector alerts the price increases across the board and secures greater profits on all types of loans. In short, the financial crisis is used as an excuse to make more money for the mortgage companies and thus also for the banks that own large parts of the mortgage loan sector. Bank / Totalkredit, as the only major corporation, is not owned by the banks, but in turn has strategic banking interests and great ambitions with Bank Bank.
Banks increase earnings on mortgage loan
The banks see the mortgage industry as an opportunity to gain access to a large number of customers. The problem, seen from the banks, has been that earnings in the mortgage-loan sector do not meet the banks’ usually high requirements for earnings. The cost for the customer has simply been too low in the banks’ perspective, so they are now changing.
One could suspect the banks to want to completely abolish the mortgage loan system and introduce a clean banking model, but fortunately it has not succeeded – so far. On the other hand, it has succeeded in making the mortgage market opaque to the consumers and raising the costs in this respect. In the longer term, the opportunity for the EU to put obstacles in the way of the Danish mortgage loan model. There the banks are crying dry tears over.
Bank raises prices
This time it was Bank / Totalkredit’s turn to raise the price from January 1, 2015. Next month it is probably another company, because it does not end here.
Read Bank’s announcement of new prices
Bank uses this opportunity to introduce a new mortgage loan, which will replace the old F1 and F2 loans. The compensation is a variable-rate loan and an allegedly better hedge against future financial crises, which in itself is very good. But the new products also make it possible to make more money on customers, and wonder if that opportunity is not being fully exploited.
Opaque mortgage loan prices
The number of fees, brokerage fees, course deductions, contributions and many more has become so large that it is almost impossible to understand for the ordinary customer. Isn’t it enough with a single price for a loan to understand? Shouldn’t it be good business for companies to make it easy to be mortgage loan?